(1) Who is Authorized to Direct Special Audit and When such Direction can be made? [Section 66(1)]
If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner.
(2) Time Limit for completing Special Audit and Extension thereof [Section 66(2)]
The chartered accountant or cost accountant so nominated shall, within the period of ninety days, submit a report of such audit duly signed and certified by him to the said Assistant Commissioner mentioning therein such other particulars as may be specified:
Provided that the Assistant Commissioner may, on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason, extend the said period by a further period of ninety days.
(3) Special Audit May be Directed Even if Accounts are Audited under Any Other Law [Section 66(3)]
The provisions of sub-section (1) shall have effect notwithstanding that the accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force.
(4) Registered Person .3lust be Given Opportunity of Being Heard Prior to Using any Finding of Special Audit Against him [Section 66(4)]
The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit under sub-section (1) which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.
(5) Expenses of Special Audit including Remuneration of Auditor to be Determined and Paid by the commissioner [Section 66(5)]
The expenses of the examination and audit of records under sub-section (1), including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final.
(6) Initiation of Demand & Recovery u/s 73 or 74 where Special Audit Results in Detection of Tax Liability [Section 66(6)]
Where the special audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under section 73 or section 74.
Some important FAQ’s on Special Audit under GST Released by CBEC on 31.3.2017
1. Under what circumstances can a special audit be instituted? [Question No. 19 of FAQ’s]
Ans. A special audit can be instituted in limited circumstances where during scrutiny, investigation, etc. it comes to the notice that a case is complex or the revenue stake is high. This power is given in section 66 of CGST /SGST Act.
2. Who can serve the notice of communication for special audit? [Question No. 20 of FAQ’s]
Ans. The Assistant/Deputy Commissioner is to serve the communication for special audit only after prior approval of the Commissioner.
3. Who will do the special audit? [Question No. 21 of FAQ’s]
Ans. A Chartered Accountant or a Cost Accountant so nominated by the Commissioner may undertake the audit.
4. What is the time limit to submit the audit report? [Question No. 22 of FAQ’s]
Ans. The auditor will have to submit the report within 90 days or within the further extended period of 90 days. .
5. Who will bear the cost of special audit? [Question No. 23 of FAQ’s]
Ans. The expenses for examination and audit including the remuneration payable to the auditor will be determined and borne by the Commissioner.
6. What action the tax authorities may take after the special audit? [Question No. 23 of FAQ’s]
Ans. Based on the findings/observations of the special audit, action can be initiated under Section 73 or Section 74 of the CGST/SGST Act.